The Chinese group behind Pinduoduo and Temu continues its meteoric rise. But it has to be said that the whole remains open to question.
In the first nine months of the year, PDD posted sales of $40.3 billion, compared with $22 billion at the same time last year. Operating profit reached $12 billion, compared with $5 billion at the end of the third quarter of 2023.
This compares with PDD's sales of $73 million eight years ago. "Meteoric" is indeed the term used to describe the rise of a group which, like Shein, emerged largely in the wake of TikTok.
In these circumstances, it may come as a surprise to see PDD's valuation fall so sharply over the past few months. Despite its growth performance, its profitability worthy of Google rather than an e-commerce site, and its lack of financial leverage, all multiples are in sharp compression.
It's true that, over and above the risks traditionally associated with Chinese companies - including : accounting of dubious integrity, opaque offshore control structures and the whims of an interventionist central party - there's something strange about PDD's economic performance, which is almost too perfect to be credible.
Even if we understand that its business model is based purely on intermediation, how does PDD, for example, continue to post such high gross margins - much higher than Amazon's - while practicing such an extraordinarily aggressive low-cost sales strategy? Or to sustain R&D spending at a fraction of that of its peers, and yet remain competitive?
There's a mystery to be unraveled here, in addition to two realities that should catch up with the Group very quickly. Firstly, the awakening of its competitors Alibaba and JD.com, who have no doubt fallen asleep at the handlebars in recent years. Secondly, regulators in the United States and Europe, who in both cases take a very dim view of this model designed to avoid customs duties.
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